Let's set the PACE for a clean recovery
June 18, 2020
Guelph has a potent tool at its disposal to help the community to recover from the economic ravages of the pandemic. It’s called PACE: Property-Assessed Clean Energy.
PACE can finance property improvements like better insulation, solar panels, and carbon-free electric heating using highly efficient heat pumps. PACE removes the biggest barrier to such projects - the upfront capital cost. Since its 2008 launch in the US, PACE has delivered an impressive US$7.7B (C$10.5B) in aggregate investment across nearly 300,000 projects.
With PACE, the property owner borrows money through the municipality, uses it for an energy and/or water efficiency project, and then repays it over an extended time - as much as 30 years - via their property tax bills. The project reduces utility costs, and these savings help offset the principal and interest repayment. The project provides the owner with other benefits as well, including a quieter, more comfortable, healthier building, and the satisfaction of being part of the climate change solution rather than part of the problem.
A home equity line of credit (HELOC) can accomplish the same thing, but most people only use it for granite countertops and walk-in closets. It has utterly failed to make headway for financing energy efficiency. Unlike a HELOC, PACE is attached to the property rather than the property owner, so it doesn't affect the owner's credit rating. What's more, if the property is sold, it can be transferred automatically to the new owner, along with all the benefits. PACE properties also offer enticing benefits for mortgage lenders, including a lower default rate than the average, and a higher resale value (above and beyond the value of the PACE loan).
Our Energy Guelph presented a PACE program proposal to Guelph City Council in January of this year. In our model, OEG and its partner organizations do all of the heavy lifting for the program, including providing all of the money. The municipality does only the bare minimum needed to administer the Local Improvement Charge mechanism (the regulatory tool that underpins PACE). Council voted unanimously in favour of moving on to the next stage, asking City staff to identify what their pared-back role would cost. This will pave the way for OEG to ensure that the program recovers 100% of that cost from participants with no burden on taxpayers. It was very encouraging to see such an enthusiastic response from our elected representatives.
Over the past few months, as the pandemic has devastated both individual lives and the economy, it has become evident that PACE can play another role - economic stimulus. PACE retrofits are labour intensive, and that kind of labour can’t be outsourced. Many products used in PACE projects are made here in town (like solar panels) or nearby. This means that a PACE program could put unemployed people back to work - providing labour, supervision, and program administration. It would also help property owners to save on their energy bills, improving their economic resilience. This would be a welcome outcome as the community begins the slow and painstaking process of reopening from COVID restrictions.
Here’s hoping that the City of Guelph continues to support OEG’s efforts to bring a PACE program to our community.
Alex Chapman, Executive Director